The combination of low real rates, higher equity valuations, overinvestment in commodities, high profitability, lower capitalization rates in real estate and tighter credit spreads argues for just a moderate overweight to equities for now.
Highlights
Our recommended position generally remains overweight risk assets, underweight duration in sovereigns and modestly overweight income strategies
US small-cap, energy and tactical equity overweights in the US and Japan all helped performance during June—we update these and other trades
We highlight three additional trade ideas this month that are designed to take advantage of carry and relative-value factor opportunities
Where Do We See Opportunities
We recommend above-average portfolio diversification and smaller deviations from strategic allocations, because the gaps among expected risk-adjusted returns from different asset classes and strategies are modest by historical standards.
We remain overweight risk assets and underweight duration in sovereign bonds, and we're modestly overweight income strategies. Display 1 on the right includes a summary of our current views.